The Beer Game

What struck your mind after looking at the name "Beer Game"?? My first thought when I saw the mail about the game, was the competition between Aamir and Sharman Joshi in RDB. But some how interested by the name and the creative poster, we formed a team to participate.

A little gyan, The beer game was developed at MIT in the 1960s. The beer game exercise is a simulation of a production-distribution system for a consumer product, such as beer. The exercise demonstrates the impact of system structure on human performance in a complex process. Each team has a Manufacturer, distributor, wholesaler and a retailer with Each player's goal being maximizing profit. The customers would be the people organizing the event and there would be no communication between the players except for the placing of orders by passing of a sheet. The winner would be the team which maximizes profits by reducing the losses and the inventory costs.

The game started after a little strategy making and our strategy was that the manufacturer and the distributor (thats me) would maintain large inventories and the retailer and the wholesaler maintains considerably smaller inventories. The first two rounds were a cake walk until the demand started becoming very unstable. I felt that we somehow missed the logic that even the wholesaler needs to have a large inventory. But the rules of the game doesn't allow me to communicate that to the wholesaler. The demand dropped sharply towards the end and we were left with huge scrap inventory which was a loss.

Keeping the game aside, there was a great learning. It was an actual simulation of any company which has a large supply chain involved. I understood the importance of strategy and may be the McKinseys and the BCGs into play here. The inventory cost and the scrap costs also wouldn't matter if the profit per unit is quite high compared to the costs.

Three cheers and a big pat on the back for OIG (Operations Interest Group, IIM L) for the wonderful experience.

{Sources: http://maaw.info/TheBeerGame.htm

http://www.public.asu.edu/~kirkwood/sysdyn/BGame/BGame.htm}

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